China has said that it will invest $280 billion in Iran’s besieged oil and gas industry

China has said that it will invest $280 billion in Iran’s besieged oil and gas industry as it seeks to exploit President Trump’s aggressive foreign and trade policies to set up a rival economic order to that of the West.

The cash injection, part of a $400 billion agreement reached between the two countries in 2016, has been confirmed in a visit to Beijing by Mohammad Javad Zerif, Iran’s foreign minister, according to the respected trade magazine Petroleum Economist.

The investment will be planned in such a way as to minimise repercussions to Chinese companies for breaching US sanctions.

China will avoid paying in dollars by using its own currency, the yuan, along with “soft currencies” earned from international trade in weaker economies such as those in Africa. It is a long-held dream in China that the yuan will one day challenge the dollar as an international and reserve currency.

In return China will be able to buy oil, gas and petrochemical products at a guaranteed discount of at least 12 per cent, and will have first refusal to run all new or rebooted oil, gas and petrochemical production projects.A significant clause allows the Chinese to station up to 5,000 security personnel in Iran to protect its investments, with more to guard supply lines, including in the Gulf.

Details of the deal have not been made public, presumably through fear of US retaliation, but they were leaked by an Iranian delegate at Mr Zarif’s talks in Beijing last week and have been promoted by Iranian state media. Iran and China have regarded each other as strategic allies for decades, with both resistant to the US-led world order. Analysts said that Beijing was reacting not only to the opportunity provided by Washington’s attempts to isolate Iran, but to Mr Trump’s assault on China’s export trade.

The Supreme Leader, Ayatollah Ali Khamenei, has refused to compromise in his stand-off with President Trump or answer his call for negotiations, despite the threat of civil unrest and the hardships faced by ordinary Iranians.

China has announced massive investments in Iran before, and cynics have pointed out that the sums pledged never seem to materialise in the visible parts of the Iranian economy. However, the Chinese state oil companies CNPC and Sinopec now have a significant presence in Iran.

The economic rise of China from 2001 has coincided with American determination to pressure Iran over its nuclear programme. China, which has to import most of its petroleum and gas, has seen an opportunity to secure a long-term “fallback” supplier, given the close alliance of many Middle Eastern producers to the US, and America’s naval control of international shipping lanes. Trade volumes between China and Iran rose from $7 billion in 2007 to $45 billion in 2014-15, at the height of Obama-era sanctions against Tehran.

On Wednesday Brian Hook, the US diplomat charged with overseeing the sanctions programme, announced further measures to cut off Iran’s oil exports. The US Treasury issued a list of companies, ships and individuals that continued to deliver oil for Tehran, especially to Syria. Chinese companies have also been hit. It is an open secret that Iranian vessels are transferring oil to Chinese tankers at sea, with their satellite transponders turned off to avoid detection. China’s purchases of Iranian crude oil — whose sales overall have plunged by as much as 80 per cent since sanctions were reimposed — and products such as liquefied natural gas have kept the Iranian economy afloat.

China is intent on drawing Iran further into its Belt and Road initiative to build trade routes across central Asia. It has already invested heavily in Pakistan and other neighbours of Iran.

In addition to the $280 billion investment in Iran’s oil and gas sector, China will put in $120 billion to upgrade its transport infrastructure, according to the deal agreed between Mr Zarif and his Chinese counterpart, Wang Yi. It has already contributed to the building of the Tehran metro and is constructing a rail line between Tehran and Mashhad, almost 500 miles to the east.

Robin Mills, an energy consultant based in the Gulf, said that China had a habit of seizing on crises in Iran’s relationship with the US to announce big investments, while holding back on fully exploiting them. “CNPC and Sinopec have US exposure and they don’t want to risk that,” he said. “They do want to make sure that when sanctions are lifted they can go full speed ahead.”

Seyed Hossein Mousavian, a researcher at Princeton University and former Iranian diplomat, said: “China is already doing business with Iran regardless of the sanctions.”

Last night Iran notified the EU that it was lifting curbs on nuclear enrichment, abandoning its commitment to the 2015 nuclear deal with world powers.

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